Warning: this is a rant….
I am totally fed up with getting emails from vendors claiming to have the “be-all-and-end-all” solution for supporting the UCITS IV Key Investor Information Document – unfortunately all of the solutions I have seen are focusing on a narrow aspect of the problem space…
I see the following problem spaces being targeted: distribution, production, comparison, work-flow, narrative management, and data management / data quality management.
Some vendors see KIID as a distribution problem – which let’s agree is part of the issue. Asset management companies will have a challenge in getting their KIID documentation out to market, but this will be no different to the problems they have today with getting their other compliance (e.g. simplified prospectus) and marketing documents (fact sheets) to market. The emergence of global and local document stores from e.g. Morningstar, FundsLibrary and FundInfo will facilitate and make this process more straightforward. The platforms and open-architecture distribution houses will also have problems sourcing the latest KIID, again though the document store vendors will solve this problem.
Some vendors see the issue purely as a document production exercise – they do not care where the data is coming from, what quality it is, nor do they have any interest in the data – other than to collate it all together into a nice glossy document. They seem to have lost sight of the fact that this is a legal document, albeit it in the guise of a marketing document that should be understandable by the average person on the street. KIID is not a marketing document – the gloss factor of the document is a very low priority for asset managers who are concerned about KIID - their issue is getting the document to market with consistent, accurate, timely data – with narrative that is clear and understandable. Some of these vendors are even offering to create the KIID directly from the simplified prospectus, even though the KIID guidelines very clearly and without any ambiguity state that the content for the document should not be extracted from the prospectus documents.
Other vendors see the problem space as one of workflow – so they have spotted that this document is not your average marketing output and does have some requirement for approval across many departments. I think these vendors are starting to touch on the aspects of KIID that are of true concern to compliance and marketing officers who are actively engaged in KIID projects today. You see the document is definitely a legal document and so compliance want to have a defined role in the document sign-off, but marketing also have a role to play in ensuring the document is drafted in language that can be understood by the average investor of the fund – marketing may even be the main sponsor of the project since the document is ultimately required at point-of-sale.
My own discussions lead me to the conclusion that what is worrying asset managers most is how they will manage the narrative texts within the document, ensuring that compliance, marketing and the investment manager all get to review and comment before publication. But implementing a review cycle with multiple interested parties for what could be hundreds of documents for a medium-sized asset manager and potentially thousands for a larger manager is a daunting task. When you add to this the task of managing the quality of the data flowing into the document production process you have a problem of truly epic scale.
To have a scalable and efficient KIID process, you do need all the wheels and cogs in your machine working in tandem – so do not lose sight of the broader problem spaces – ensure your project has in-scope: distribution, production, comparability, work-flow, narrative management and data quality management.